GLOSSARY OF INTERNATIONAL SHIPPING TERMS

A

Ad ValoremAccording to the value. For example, an import duty rate of 10% ad valorem means 10% of the value of the goods.

AgentAn independent person or corporation acting as a representative, usually in a foreign market, who attempts to sell products for an overseas seller (principal) and earns a commission on successful sales. Agents are not normally involved in delivery or servicing of product.

Air Waybill (AWB)The document which covers transport by air. It is issued by the carrier, whether an airline or a freight forwarder, as a non-negotiable document serving as a receipt to the consignor for the goods, and containing the conditions of transport. It also shows the details of the consignee so that they can be contacted on arrival of the goods.

HAWBHouse AWB issued by a freight forwarder acting as a carrier.

MAWBThe term used for the AWB issued on airline's stationery to a freight forwarder for all of the goods covered by one or more House AWBs on the one flight going from one loading airport to one destination airport.

ApplicantThe buyer who has requested his bank to arrange an L/C on his behalf. In some countries where the buyer may have trouble arranging an import license, the applicant may be a third party acting on behalf of the buyer.

B

BAFBunker Adjustment Factor - an adjustment to shipping companies' freight rates to take into account fluctuations in the cost of fuel oil (bunkers) for their ships.

Bank GuaranteeA document issued by a bank acting as a guarantor for their customer. The bank's guarantee is accepted because of their status and creditworthiness compared to that of their customer. Often used in conjunction with major projects, in the form of Bid Bonds, Performance Bonds, and Warranty Bonds, commonly for 10% of the contract value, all of which provide the buyer with a measure of comfort should the seller not fulfill his obligations at various stages of the contract.

BeneficiaryThe seller in whose favor an L/C is issued, ie the person who will "benefit" from the L/C. (See also Letter of Credit).

Bill of ExchangeAn unconditional order in writing, issued by the seller (drawer) instructing the buyer (drawee) to pay the seller's bank (payee) a specified amount (normally the full invoice value) on demand (at sight) or at a fixed or determinable future time. A suitable form can be obtained from the seller's bank, or drawn upon a blank sheet of paper.

Bill of Lading (B/L)The document which covers transport by sea. Signed by the carrier, whether a shipping line or a freight forwarder, it serves as a receipt to the consignor for the goods, as evidence of the contract of transport containing the conditions of transport, and as a document of title by which possession of the goods can be transferred. Typically a B/L is issued in a set of three signed originals or negotiables, one of which must be presented to claim the goods upon which the others become void.

Combined Transport / Multimodal B/LA B/L covering transport by shipping container from an inland place prior to the loading port, to an inland place beyond the destination port. Most freight forwarders and shipping companies title their B/Ls as "Bill of Lading for Combined Transport or Port-to-Port shipment" or similar.

Congen B/LA standard form of bill of lading used in shipments by chartered ship.

Clean B/LA bill of lading indicating that the goods were received by the carrier in good order and condition, without any clauses declaring a defective condition in the goods and/or their packing.

Dirty/Foul/ Claused B/LA bill of lading with any clauses declaring a defective condition in the goods and/or their packing. Almost invariably not acceptable to banks for presentation under L/Cs and almost always not acceptable to the buyer. (See also Clean Bill of Lading).

House B/LA bill of lading issued by a freight forwarder acting as a carrier. The terms and conditions of the contract may well be different to the terms and conditions contained on the shipping company's B/L, which can in extraordinary circumstances lead to legal complications should a dispute arise.

Master B/LThe term used for the B/L issued by a shipping company to a freight forwarder for all of the goods covered by one or more House B/Ls on the one ship going from one loading port to one destination port.

Ocean B/LA B/L covering port-to-port shipment. Typically banks continue to use this term on L/Cs even though the majority of international shipments are containerized (See also Multimodal B/L).

On Board/ Shipped On Board B/LA B/L evidencing that the goods were not only received by the carrier but were actually loaded on board in good order and condition. "Shipped" indicates that not only were the goods on board but that the ship has departed the port.

Order B/LA negotiable B/L, in which the goods are consigned "to order of" a particular party, often the shipper in which case the consignee is mostly shown simply as "to order".

Straight B/LA non-negotiable B/L in which the goods are consigned directly to a named consignee.

BoxColloquial term for a shipping container.

BreakbulkNon-containerised cargo.

BSRABasic Service Rate Additional - the charge levied by shipping companies to importers for LCL cargo, including the port charges, transport to an unpacking depot (see CFS) subsequent sorting and storage of the goods and finally loading onto a vehicle collecting the goods for delivery to the buyer

C

C&F Cost and Freight (named port of shipment) - IncotermsThis abbreviation was changed in 1990 to CFR but is still commonly used.

CAFCurrency Adjustment Factor - an adjustment to shipping companies' freight rates to take into account the effect over time of fluctuations in currency exchange rates.

CarnetA document, normally issued by a Chamber of Commerce which is a member of the International Chamber of Commerce (ICC) to enable the holder to temporarily take merchandise into certain countries, as samples or for display purposes, without the need to pay import duty or pay a bond for the duty. The issuer will require the holder to give them security by way of a bank guarantee.

Cash Against Documents (CAD)An arrangement whereby the buyer pays for goods as soon as the buyer receives the seller's documents. There is normally an intermediary involved, ie a bank or an agent acting on behalf of the seller, to ensure that the transaction takes place smoothly.

CertificateA general term for any document issued by the seller or another party, certifying to some action has taken place or some fact about the goods.

Certificate of OriginA certificate stating the country of origin of the goods. Depending on the importing country's requirements, this can be as simple as being issued by the seller or the manufacturer. In most cases, however, it is required to be issued by a Chamber of Commerce in the country of origin.

CFR Cost and Freight (named port of destination) - IncotermsThe seller must pay the costs and freight necessary to bring the goods to the named destination but the risk of loss of or damage to the goods is transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment. The seller is responsible to clear the goods for export. This term very specifically requires the carriage of the goods in a "seagoing vessel".

CIF Cost, Insurance and Freight (named port of destination) - IncotermsThis term is similar to CFR but with the addition that the seller has to procure marine insurance against the buyer's risk of loss of or damage to the goods. This term very specifically requires the carriage of the goods in a "seagoing vessel".

CIP Cost and Insurance Paid to (named place of destination) - IncotermsThis term is similar to CPT but with the addition that the seller has to procure marine insurance against the buyer's risk of loss of or damage to the goods covering that period until the goods have been delivered from the carrier to the buyer. Being based on FCA, this term may be used for any mode of transport.

CFSContainer Freight Station - place or depot where individual LCL cargo is loaded into, and unloaded from, containers

CharterpartyA written contract between a shipowner and a charterer who rents use of the ship or part of its freight capacity. A voyage charter party is a contract covering the transport of goods from one or more ports to one or more ports and will detail the costs and responsibilities involved.

Commercial InvoiceA document issued by the seller, addressed to the buyer, giving details of the individual transaction, including a complete description of the goods, prices, currency, delivery and payment terms and so on. This is generally used by the Customs authorities in the importing country to assess customs duties payable.

ConferenceA group of shipping companies who have associated to offer regular services on specific routes at published rates. Sometimes referred to as liner shipping. Non-conference shipping lines are sometimes referred to as independent or outsiders.

ConsigneeThe party is shown on the bill of lading or air waybill to whom the shipment is consigned. Need not always be the buyer, and in some countries will be the buyer's bank. See also Bill of Lading - Order B/L and Notify Party.

ConsolidationWhere a freight forwarder groups, or consolidates, one or more shipments for one or more shippers to the one destination as one overall shipment. (See also House B/L and Master B/L).

Consular InvoiceThe seller's commercial invoice certified, for a fee, in the exporting country by the consular representative of the importing country. Now required only by a handful of countries.

Container shipThe ship designed to take ISO (International Standards Organisation) containers in vertical cells within the ship's holds as well as on the deck. These ships generally rely on infrastructure on the wharf to load and unload the containers.

Conventional shipThe ship designed with holds which can load almost any type of loose cargo, such as drums, sacks, crates, pallets etc. These ships are designed with their own derricks for loading and unloading.

CPT Carriage Paid To (named place of destination) - IncotermsThe seller must pay the costs and freight necessary to bring the goods to the named destination but the risk of loss of or damage to the goods is transferred from the seller to the buyer when the goods have been delivered into the custody of the carrier. Being based on FCA, this term may be used for any mode of transport.

Customs BrokerA person or corporation licensed by the Australian Customs Service to handle on behalf of importers the process of clearing goods through customs.

Customs DutyA tax, duty or tariff levied at the time of import upon goods entering a country. Usually based on the value of the goods (ad valorem), on the physical nature of the goods such as quantity or weight, or on a combination of the value and other factors.

CYContainer Yard - place or depot where individual containers are held prior to loading on board a ship and after unloading from the ship. Can be inland or at the dock-side.

D

DAF Delivered at Frontier (named place) - IncotermsThe seller must pay the costs and freight to bring the goods to a land frontier, but before the customs border of the adjoining country. This term is for land transport only.

DDP Delivered Duty Paid (named place of destination) - IncotermsThe seller fulfills his obligation to deliver when the goods have been made available at an agreed point at the named place in the country of importation, often the buyer's premises. The seller has to bear the risks and all costs, including duties, taxes and other charges of delivering the goods thereto, cleared for importation. This term should not be used if the seller is unable directly or indirectly to obtain any necessary import license or approval. This term may be used for all modes of transport.

DDU Delivered Duty Unpaid (named place of destination) - IncotermsThe seller fulfills his obligation to deliver when the goods have been made available at an agreed point at the named place in the country of importation. The seller has to bear the risks and all costs and other charges of delivering the goods thereto, but not including duties and taxes. The buyer is responsible for customs clearance, and if he fails to do this, he is responsible for the consequences. This term may be used for all modes of transport.

Documentary CollectionA method whereby the seller uses the services of his bank to ensure that the buyer only receives the shipping documents under conditions specified by the seller, ie upon payment, or upon acceptance, of the seller's bill of exchange. (see also Bill of Exchange, Cash Against Documents and URC522).

Documentary CreditThe officially correct term for Letter of Credit. The UCP500 only mentions "Documentary Credit" not "Letter of Credit". See also Letter of Credit and UCP500).

DemurrageExtra charges paid to a carrier when loading and/or unloading has not been completed within the specified time.

DEQ Delivered Ex Quay (named port of destination) - IncotermsSimilar to DES but the seller must also arrange discharge onto the quay or wharf.

DES Delivered Ex Ship (named port of destination) - IncotermsThe seller makes the goods available to the buyer on board the ship at the destination port and is responsible for all costs and risks until that point, as well as arrival within the given period. Typically this term would be used for bulk cargo on a chartered ship.

Documents against Acceptance (D/A)see Documentary Collection

Documents against Payment (D/P)see Documentary Collection

Draftsee Bill of Exchange

Draweesee Bill of Exchange

Drawersee Bill of Exchange

DumpingThe practice of selling goods in a foreign market at a price lower than which they would be sold at in the home market, to gain a competitive advantage over other suppliers. If this is shown to be injurious to locally-based suppliers in the foreign market, the government of that country may impose remedies by way of anti-dumping duties.

Duty DrawbackIf goods which have been imported, and upon which customs duty has been paid, are exported or have been used in the manufacture of goods which have been exported, then the exporter may be entitled to a refund of the original import duty paid.

E

Exchange RateThe price of one currency in terms of another.

ExportTo send goods from a country to an overseas destination.

EXW Ex Works (named place) - IncotermsThe seller's only responsibility is to make the goods available at his premises, (ie works or factory). The buyer bears the full cost and risk involved in bringing the goods from there to the desired destination and the buyer must be able to carry out any required export formalities. The term represents the minimum obligation for the seller.

F

FCA Free Carrier (named place)- IncotermsThe Seller fulfills his obligation to deliver when he has handed over the goods, cleared for export, into the charge of a carrier, or another person, named by the buyer at the named place or point. This term may be used for any mode of transport, including multi-modal transport.

FAKFreight All Kinds, as a general description of the goods on a master B/L, covered under the one freight rate regardless of the nature of the individual goods.

FAS Free Alongside Ship (named port of shipment) - IncotermsThe seller fulfills his obligation to deliver when the goods are placed alongside the vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The seller is responsible to clear the goods for export. This term can only be used for sea or inland waterway transport and its correct use is only when using a chartered ship, or when goods are not containerized.

FCLFull Container Load, generally but not always indicating that goods in the container are from one seller who packed the container, going to one buyer who will unpack the container.

FI (Free In)

In the international ocean freight terminology, the word “Free” means “Not included”. I.e. if FI, then the shipper is responsible for the cost of loading goods onto a vessel for the international shipping overseas.

FO (Free Out)

FO is the international shipping term in ocean freight that indicates that the consignee (recipient) is responsible for the cost of unloading cargo from the vessel at the destination.

FIO (Free In and OUT)

The international shipping term used in the ocean freight industry means that the carrier is NOT responsible for the cost of loading and unloading gods onto/from the vessel.

FIS Free into Store - IncotermsAn unofficial trade term indicating that the seller's price includes all costs up to delivery to the buyer. This is similar in effect to DDP.

Flat RackA device which is designed for cargos which will not fit into containers to be shipped on container ships. Consists of a base and two ends of the same dimensions as an ISO container.

FOB Free On Board (named port of shipment) - IncotermsThe seller fulfills his obligation to deliver when the goods have passed over the ship's rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The seller is responsible to clear the goods for export. This term can only be used for sea or inland waterway transport. This is probably the most commonly misused term in international trade. Its correct use now is only where the ship's rail is relevant to the transaction, such as when using a chartered ship, or when goods are not containerized. Obviously, it cannot apply to airfreight.

Force MajeureA clause in a contract which protects both parties in the event that part of the contract cannot be complied with due to causes outside the control of the parties and could not have been avoided by exercising due care. For example, floods, earthquakes, civil unrest and so on.

Freight ForwarderA person or corporation who arranges transport of goods on behalf of either the seller or buyer. In many cases, the freight forwarder will also consolidate several small shipments into one larger one to take advantage of better freight rates. In most cases, the freight forwarder will assume the legal liabilities of acting as a carrier

G

Gross WeightThe total weight of a shipment of goods, including their packaging such as crates, pallets etc.

Groupagesee Consolidation

Hazardous GoodsCertain cargoes, as prescribed by the UN, such as explosive, radioactive, poisonous and flammable goods etc, which must be declared to the carrier before being loaded onto ships or aircraft. The penalties for miss-declaring or failing to declare hazardous or dangerous cargo are extremely high.

L

Landed CostThe total cost which an importer pays to have goods delivered into their premises. This typically includes the costs of goods, international transport, insurance premium, port charges, customs duties, delivery charges, bank charges etc.

LCLLess than Container Load, a small amount of cargo insufficient to on its own be economically shipped as FCL. It will be combined with other LCL cargo from other shippers going to the same destination port, into a FAK FCL. See also Consolidation.

Letter of CreditA conditional order in writing, issued by a buyer's bank, guaranteeing to pay the seller upon presentation of stipulated documents, strictly in accordance with the credit. It is strongly recommended that every exporter and importer has a copy of the "Uniform Customs and Practice for Documentary Credits", International Chamber of Commerce publication 500. These are available from most major Chambers of Commerce, or from us at AUD 20.00 including postage, handling, and GST, to Australian addresses only.

Letter of Credit- ConfirmedA letter of credit which has been further guaranteed by a local bank generally in the exporter's country.

Letter of Credit - IrrevokableA credit which cannot be revoked, canceled or amended unless the beneficiary agrees. Virtually all L/Cs issued under UCP500.

Letter of Credit- DiscrepancyWhere a document does not comply strictly with the terms and conditions of an L/C.

Letter of Credit- Under ReserveWhere documents with discrepancy/ies are nevertheless negotiated against an L/C, and the negotiating bank reserves the right to take back the funds from the exporter if the discrepancy is not acceptable to either the buyer or the L/C issuing bank.

P

Packing ListA document which details the contents, and often dimensions and weight, of each package or container.

Payeesee Bill of Exchange

Phytosanitary CertificateA document issued by the Department of Agriculture, Fisheries, and Forestry, for exports from Australia of plants or plant products.

Port chargessee APCA, BSRA, and PSC

Pre-paymentThe buyer pays the seller for the goods prior to shipment.

Pro Forma InvoiceA sample invoice issued by the exporter before shipment, which the importer may require to arrange import approvals or apply for a letter of credit. It can also be used as an offer to sell goods.

R

ReeferColloquial for a refrigerated container

RO-ROA "roll-on/roll-off" ship, where loaded transport vehicles are driven onto it, such as a car ferry, or where containerized and other cargo is loaded into it by forklifts or similar. Shipping MarksSpecific markings on packages to identify them apart from other packages and to identify them on the relevant documents.

S

Sight DraftA bill of exchange drawn "at sight" meaning that as soon as the drawee accepts the bill it falls due for payment. See also Bill of Exchange.

STCSaid to contain, often placed before the description of goods on a bill of lading because the carrier does not know the nature or quantity of goods actually placed in the packages or the containers.

U

UCP500Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce publication 500, which lays out guidelines for banks to follow when dealing with L/Cs. (See also Letter of Credit).

URC522Uniform Rules for Collections, International Chamber of Commerce publication 522, which lays out guidelines for banks to follow when handling Collections. (See also Collections).

V

Value for DutyThe value of an import declared to the customs upon which customs duty will be calculated. In Australia, the value of the goods at the time of export from the exporting country, thus generally the FOB value and using the exchange rate at the date of export. Many other countries use the CIF value at the time or declaration in the importing country.

VolumetricA notional or calculated weight for bulky goods sent by air. Generally stated as 6000cm3 = 1 kg, meaning that the total volume in cubic centimeters is divided by 6000 to give an equivalent weight in kgs. The airline or forwarder will charge whichever is the greater of the actual weight and volumetric weight. Also shown sometimes as 167 kg = 1 cbm